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1. Homework 5 Arlington Cycle Company began operations on Jan 1, 2014. The company reported the following selected items in its 2015 financial report: 2015

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1. Homework 5 Arlington Cycle Company began operations on Jan 1, 2014. The company reported the following selected items in its 2015 financial report: 2015 2014 Gross Sales $1,400,000 $1,500,000 Accounts Receivable 600,000 650,000 Actual bad debt write-offs 26,000 10,000 Arlington estimated bad debts at 2% of gross sales. Analyze the activity in the Allowance for Doubtful Accounts T-account, and comment on whether the bad debt estimate has been sufficient to cover the write-offs. 2. In its 2014 financial report, Unsound Limited reported the following items: 1. A credit balance of $200,000 in Allowance for Doubtful Accounts. 2. Sales of $3,250,000 During 2014, the company had the following transactions related to Allowance for Doubtful Accounts. 1. Wrote off accounts considered uncollectible totaling $195,000, 2. Recovered $45,000 that had previously been written off. Assume that historically 5% of sales has proven to be uncollectible. Compute the December 31, 2013 balance in Allowance for Doubtful Accounts, and show all journal entries related to the allowance account for 2014

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